Mood at Davos weighed down by war, inflation and food crisis

It may not be the Steinberger Grandhotel Belvedere, the traditional venue of Davos’s swankiest parties and power lunches, but the Der Pate Italian restaurant and pizzeria beside the Swiss town’s main train station is normally a heaving spot when the World Economic Forum (WEF) rolls into town in January.

However, delegates turning up at the restaurant, whose name means The Godfather in German, during the WEF this week were met by a notice saying management and staff were on holidays — and wouldn’t be back until June 2nd.

They were not the only ones who decided to skip the first ever Davos gathering in May of the global elite and hangers-on, after the past two normal January events were cancelled due to the coronavirus pandemic.

The 2,000 or so political, business, academic and civil society leaders and journalists estimated to have turned up at Davos this year are down from the 3,000 participants at the event in early 2020.

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First of all, no Russians were invited, following the country’s invasion of Ukraine three months ago.

Take Oleg Deripaska, Russian oligarch who is a major shareholder in Aughinish Alumina in Limerick through his aluminium company Rusal. He may have been known to throw some of the Davos’s most lavish parties, including one, some years ago, where models dressed as flight attendants spoon-fed guests caviar and vodka shots. He’s now currently on EU, US and UK sanctions lists.

The traditional House of Russia on the Swiss town’s main promenade, used of old as a high-profile venue to promote business in the country, has been rented out by the foundation of Ukrainian businessman Viktor Pinchuk and turned into the so-called House of War Crimes in Russia.

Former US president Donald Trump may have provided some of the best storylines in recent WEFs — using an address to the Davos crowd in 2018 to try to ease concerns about his protectionist policies, and taking a swipe two years later at climate “prophets of doom”, with environmental activist Greta Thunberg in the audience. But his successor, Joe Biden, was in Asia this week meeting the leaders of Japan, Australia and India — even if he sent his commerce secretary Gina Raimondo and climate envoy John Kerry to Switzerland.

And while the snow-capped mountain backdrop has been too much to resist in Januaries past for A-listers such as actors Leonardo DiCaprio, Angelina Jolie and Matt Damon, rappers Will. I. Am and Pharrell Williams, and Davos regular Bono, the closest this year’s event got to a celebrity was the appearance of Hulk star Mark Ruffalo as a signatory on an open letter from a bunch of wealthy individuals to political leaders asking be to taxed more. But not even he showed up to the forum.

“It’s more low key than our usual Davos, with fewer people here,” Tánaiste Leo Varadkar, attending the event for the third time, told The Irish Times on Wednesday. “But that’s not a surprise, given that it’s in May, rather than in January, and the fact that it was organised with relatively short notice.”

Still, the founder of the WEF, Klaus Schwab, said from the outset that this year’s Davos, sans the snow, was the “most timely and consequential” in its 52-year history, as participants gather in the Swiss resort town against the backdrop of the war in Ukraine and mounting fears about the outlook for the world economy and climate.

While the star speaker at the WEF, Ukrainian president Volodymyr Zelenskiy, was beamed in virtually, he did send about a dozen high-ranking officials including his finance minister, Dmytro Kuleba, and Vitali Klitschko, the mayor of Kyiv and former world heavyweight boxing champion.

Other high-profile attendees included European Commission president Ursula von der Leyen, European Central Bank head Christine Lagarde, Bank of United States chief executive Brian Moynihan, Pfizer chief executive Albert Bourla, Intel chief executive Pat Gelsinger, and a bevy of EU leaders, including Taoisaeach Micheál Martin.

Billionaire investor and philanthropist George Soros issued one of the starkest warnings about what is at stake in a speech on Tuesday evening, at his traditional private Davos dinner on the sidelines of the forum.

The nonagenarian, who earned the title of “the man who broke the Bank of England” when he bet against sterling in 1992, said that Russia’s invasion of Ukraine may have been the beginning of the third World War.

“The invasion may have been the beginning of the third World War and our civilisation may not survive it,” Soros said. “The best and perhaps only way to preserve our civilisation is to defeat Putin as soon as possible. That’s the bottom line.”

Soros said Putin’s Russia and China were leading members of an ascendant group of autocratic regimes and “closed societies”, and that the global economy was heading for a depression as a result of soaring inflation.

The majority of a group of chief economists surveyed by the WEF before the forum said that they expect “high or very high inflation” to remain a feature across most of the world, except China and eastern Africa, amid the war in Ukraine and continued surges of Covid-19 variants and associated shocks on supply chains.

“We are at the cusp of a vicious cycle that could impact societies for years. The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences,” said Saadia Zahidi, a managing director at the WEF.

International Monetary Fund staff, including managing director Kristalina Georgieva, wrote in a blog that flows of money, goods, services and people over the past three decades of globalisation — which is pretty much everything that Davos stands for — may have helped triple the size of the global economy and lift 1.3 billion people out of extreme poverty. However, this has led to complacency, they said.

“Inequalities of income, wealth, and opportunity have continued to worsen within too many countries for a long time — and across countries in recent years. People have been left behind as industries have changed amid global competition. And governments have struggled to help them,” they wrote.

The pandemic has led to waves of protectionism and restrictions around the world, exposed the fragility of supply chains and left China, sticking to a zero-Covid policy, closed off, largely shut off from the rest of the world in recent times. Russia’s invasion of Ukraine has also forced hundreds of western companies, who had turned a blind eye to Putin’s despotic ways, to retrench from the Russian market — and EU countries to rush to reduce their reliance on oil and gas from the country.

Varadkar found himself involved in debates at Davos on whether globalisation was dead.

“A speaker at one of the events I was at said that globalisation had peaked. But another, who I’d agree with, said that we’re seeing a lull in globalisation, but that it will continue,” he said. “The world is becoming a smaller place all the time. It’s getting easier to get around. We’re more connected because of technologies. Geographic distances are less important.

“Globalisation is not going to be a straight-line graph. There are going to be bumps in the road, there’s going to be setbacks, there’s going to be lulls,” he said. “But we need to continue to talk and find solutions to the important challenges that come up at the World Economic Forum.”

While the organisers of the WEF sought this week to hold political and business leaders’ feet to the coals on climate action, almost seven months after the COP26 UN climate conference to keep the dream of limiting global warming alive, this never made it to the top of the agenda, as Ukraine, the state of the world economy, and a mounting international food crisis dominated proceedings.

Citigroup chief executive Jane Fraser said on a panel on Monday she believes Europe is sliding into recession as it grapples with the consequences of war in Ukraine and a resulting spike in energy prices. The official EU forecast is that the union’s economy will expand by 2.7 per cent this year.

Fraser, who last year became the first woman to lead a major Wall Street bank, added that while the US economy had so far shown itself to be more resilient, it too may yet skirt a recession.

Of the plethora of challenges facing the world today, Fraser described food as the big concern. “That could be the wild card,” she said.

With the Horn of Africa, comprising Ethiopia, Kenya and Somalia, currently ravaged by the worst drought in decades; India and Pakistan in the middle of a stifling heatwave, and Russia blocking wheat and sunflower seeds exports from Ukraine at ports along the Black Sea, the UN estimates that about 200 million people are facing acute hunger, double the figure of five years ago.

“We are in trouble. The war in Ukraine is dramatic in so many ways. There is an acute crisis in food, fuel and finance,” Achim Steiner, the administrator of the UN Development Programme said at the WEF. “We are in the middle of a series of unfolding crises and the world is not prepared for it.”

With many of the political grandees from the rest of the world absent from Davos, EU leaders found themselves holding a stronger voice than usual.

Dutch prime minister Mark Rutte was on a roll on a panel discussing “European unity in a disordered world”, highlighting how the EU surprised the world by how quickly it responded collectively to the Covid-19 crisis and Russia’s invasion of Ukraine.

“We were all amazed by how fast we could act,” said Rutte, who, in his 12 years as prime minister, has sat through his fair share of late-night EU-level crisis debates that went nowhere.

Rutte said that the EU, for too long, has punched below its weight on the global stage, and has for “too long been a playing field instead of being a player”. He used the platform to say that big countries like Germany, France and Italy will ultimately need to give up some of their sovereignty on foreign policy in order for the EU to take a lead in major issues internationally.

ECB president Christine Lagarde said on the same panel that Europe needed to “flex its muscles” more internationally, based on the facts that it is the top trading partner of 80 other countries around the world and has massive purchasing power.

“That is power,” she said. “But we have to be that moral power that puts values in advance of the gains and savings that we have focused too much on in the past.”

But, of course, national interests remain high on the agenda, as ever, at Davos, with the Taoiseach making sure to attend an IDA dinner on Wednesday evening for more than 50 international business executives.

Multinationals based in Ireland announced a record number of new jobs last year, even as the economy struggled with Covid-19. This was, according to IDA chief executive Martin Shanahan, largely due to the IDA’s focus on areas such as technology and pharmaceuticals and the fact that large overseas companies gravitated towards “tried to trusted” locations for investment when pitches were being made via Zoom calls, rather than in person.

Shanahan, for one, wasn’t disheartened by this year’s more low-key Davos.

“We may not have the usual razzmatazz this year, but the people I want to speak to are here,” he said. “Attending Davos is still one of the most efficient uses of my time.”